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Friday, May 30, 2014

The Impossibility of Growth

Eternal growth: both insane and impossible:

Let us imagine that in 3030BC the total possessions of the people of Egypt filled one cubic metre. Let us propose that these possessions grew by 4.5% a year. How big would that stash have been by the Battle of Actium in 30BC? This is the calculation performed by the investment banker Jeremy Grantham.
Go on, take a guess. Ten times the size of the pyramids? All the sand in the Sahara? The Atlantic ocean? The volume of the planet? A little more? It’s 2.5 billion billion solar systems. It does not take you long, pondering this outcome, to reach the paradoxical position that salvation lies in collapse.

To succeed is to destroy ourselves. To fail is to destroy ourselves. That is the bind we have created. Ignore if you must climate change, biodiversity collapse, the depletion of water, soil, minerals, oil; even if all these issues were miraculously to vanish, the mathematics of compound growth make continuity impossible.

Economic growth is an artefact of the use of fossil fuels. Before large amounts of coal were extracted, every upswing in industrial production would be met with a downswing in agricultural production, as the charcoal or horse power required by industry reduced the land available for growing food. Every prior industrial revolution collapsed, as growth could not be sustained. But coal broke this cycle and enabled – for a few hundred years – the phenomenon we now call sustained growth.

It was neither capitalism nor communism that made possible the progress and the pathologies (total war, the unprecedented concentration of global wealth, planetary destruction) of the modern age. It was coal, followed by oil and gas. The meta-trend, the mother narrative, is carbon-fuelled expansion. Our ideologies are mere subplots. Now, as the most accessible reserves have been exhausted, we must ransack the hidden corners of the planet to sustain our impossible proposition.

The trajectory of compound growth shows that the scouring of the planet has only just begun. As the volume of the global economy expands, everywhere that contains something concentrated, unusual, precious will be sought out and exploited, its resources extracted and dispersed, the world’s diverse and differentiated marvels reduced to the same grey stubble.

Some people try to solve the impossible equation with the myth of dematerialisation: the claim that as processes become more efficient and gadgets are miniaturised, we use, in aggregate, fewer materials. There is no sign that this is happening. Iron ore production has risen 180% in ten years. The trade body Forest Industries tell us that “global paper consumption is at a record high level and it will continue to grow.” If, in the digital age, we won’t reduce even our consumption of paper, what hope is there for other commodities?

As the philosopher Michael Rowan points out, the inevitabilities of compound growth mean that if last year’s predicted global growth rate for 2014 (3.1%) is sustained, even if we were miraculously to reduce the consumption of raw materials by 90% we delay the inevitable by just 75 years. Efficiency solves nothing while growth continues.

Virtually every economist rejects the concept of limiting growth – by which they normally mean growth in GDP. As Larry Summers, famous as a major cause of the recent U.S. financial disaster, once stated, “The idea that we should put limits on growth because of some natural limit is a profound error, and one that, were it ever to prove influential, would have staggering social costs.” More typical of the intellectual contributions of mainstream economics, John Makin of the American Enterprise Institute recently asserted that “There is no magic bullet for stimulating long-term growth, which depends largely on persistent technological change and population growth.” Long-term growth is, of course, a “ bullet,” but lethal, not “magic,” being fired directly into the heart of civilization. Even most smart economists, for example Paul Krugman, cannot get over the notion that growth is necessary to solve human problems. As Krugman said recently, ” Oh, and politics: between the non-disaster of Obamacare…and the prospect of a decent rate of economic growth, the midterm elections may not go the way many on the right currently expect.” Krugman recently spent time on TV talking about how to get growth without bubbles, opining, among other things, that Japan’s growth had slowed because of its demographic situation (Japan is one of a handful of overdeveloped nations whose populations, blessedly, have begun to shrink). He is thoroughly hooked on growth, most recently advocating reducing inequality (a good idea) to promote growth (a very bad idea). And Robert Reich recently stated that income inequality is “the enemy of economic growth,” (since it limits the power of the middle class to buy more junk). Economists like Reich and Krugman are wisely concerned with the pain people suffer through poverty and joblessness, which even in a nation as rich as the United States can still lead to clinical depression, hunger, illness, and even death. It is diagnostic of their growthmania that economic growth is inevitably their solution to the problems of maldistribution of resources – alternative approaches such as a shorter work week (an historic solution to the problem of job shortage), redistribution (except by changes in marginal tax rates), and (in the longer term) steps to limit family size are never considered.

How does one explain that economists, many of whom have knowledge of mathematics, consider that 3% per annum is a “healthy” or “decent” economic growth rate? After all, a simple calculation shows that if the U.S. (or any other) economy grew at 3% for about 23 years, it would double in size. In less than 150 years the economy would be 100 times as big. Picture the drought situation in California or the air pollution in Beijing with a doubling of economic activity occurring in only 23 years. Then picture a doubling again and again every couple of decades. Is this the future we want for our children and grandchildren?

The capitalist system requires continual growth, which means expansion of production. Its internal logic also means that its incentives are to use more energy and inputs when more efficiency is achieved — the paradox that more energy is consumed instead of less when the cost drops. Because production is for private profit, growth is necessary to maintain profitability — and continually increasing profitability is the actual goal. If a corporation doesn’t expand, its competitor will and put it out of business.

Because of the built-in pressure to maintain profits in the face of relentless competition, corporations continually must reduce costs, employee wages not excepted. Production is moved to low-wage countries with fewer regulations, enabling not only more pollution but driving up energy and carbon-dioxide costs with the need for transportation across greater distances. Economic growth of 2.5 percent is necessary simply to maintain the unemployment rate where it is and “substantially stronger growth than that” is necessary for a rapid decrease, according to a former White House Council of Economic Advisers chair, Christina Romer.

Under capitalism, all the incentives are to continue business as usual, no matter the dire future that business as usual is leading humanity. Richard Smith, in a tour de force paper published in the Real-World Economics Review, “Green capitalism: the god that failed,” summed up the dilemma:

“[T]he problem is not just special interests, lobbyists and corruption. … [Under] capitalism, it is, perversely, in the general interest, in everyone’s immediate interests to do all we can to maximize growth right now, therefore, unavoidably, to maximize fossil fuel consumption right now — because practically every job in the country is, in one way or another, dependent upon fossil fuel consumption. … There is no way to cut CO2 emissions by anything like 80 percent without imposing drastic cuts across the board in industrial production. But since we live under capitalism, not socialism, no one is promising new jobs to all those … whose jobs would be at risk if fossil fuel use were really seriously curtailed. … Given capitalism, they have little choice but to focus on the short-term, to prioritize saving their jobs in the here and now to feed their kids today — and worry about tomorrow, tomorrow.” [page 121, March 2011]

“Green” enterprises will not be granted an exemption. They, too, will be pushed by market forces the same as any other enterprise. Dr. Smith writes:

“Biofuels, windpower and organic crops — all might be environmentally rational here or there, but not necessarily in every case or forever. But once investments are sunk, green industries have no choice but to seek to maximize profits and grow forever regardless of social need and scientific rationality, just like any other for-profit business.” [page 142]

All the more is that so for the capitalist system as a whole. Fred Magdoff and John Bellamy Foster, in their book What Every Environmentalist Needs to Know About Capitalism, write:

“ ‘Green capitalism,’ even if products are produced using the utmost environmental care and designed for easy reuse, offers no way out of a system that must expand exponentially and thus continue to ratchet up its use of natural resources, its chemical pollution, its contaminated sewage sludge, its garbage, and its many other toxic substances. Some of these ‘fixes’ will probably slow down the rate of environmental destruction, but the magnitude of the needed changes dwarfs these approaches.” [page 120]